Chinese Business Law

293 Pages·2019·1.777 MB·English

by  Danling Yu

THE PALGRAVE SERIES
ON CHINESE LAW
CHINESE
BUSINESS LAW
DANLING YU
The Palgrave Series on Chinese Law
Series Editor
Dayuan Han
Law School
Renmin University of China
Beijing, China
The Chinese legal system is complex, sometimes contradictory, and mis-
understood. This series, edited by the dean of one of China’s most promi-
nent law schools, will serve as a basic reference point for legal scholars,
sinologists, and international relations scholars, explaining and clarifying
the realities of China’s legal system.
More information about this series at
http://www.palgrave.com/gp/series/15719
Danling Yu
Chinese Business Law
Danling Yu
China Foreign Affairs University
Beijing, China
The Palgrave Series on Chinese Law
ISBN 978-981-13-0901-4 ISBN 978-981-13-0902-1 (eBook)
https://doi.org/10.1007/978-981-13-0902-1
Library of Congress Control Number: 2018958587
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A
cknowledgements
Accomplishing a scholarly work on the core subjects of Chinese business
law in the English language has never been an easy task for me. I would
like to compare this experience to the life journey of a pioneering legal
academic.
First, I would like to thank my dearest father who encouraged me to
undertake this strenuous but daunting task. I took up the idea of this proj-
ect first with Renmin University of China Press that responded with such
enthusiasm and vigor that it quite overwhelmed me. I was happy though,
among other things, that a major part of legal rules, values, and principles
of Chinese corporate law, foreign investment law, and securities law unique
to Chinese legal culture have finally been translated and would be made
comprehensible upon completion of this book. After Chinese Business
Law was published, several important national business laws were revised
and regulations enacted. While preparing for an international edition by
Palgrave Macmillan, I knew that I would need a major revision. As the
subjects changed rapidly, I referred to the fundamentals and focused the
revision on the core legal rules and constraints underlying Chinese busi-
ness legal governance.
During the many years of preparing to write the book, I have been very
blessed by the love, inspiration, and courage of my family. I reflect upon
these years with a magnificent feeling of happiness and profound
gratitude.
The other person I would like to thank is our immortal and eternal
Frederick F. Chopin who has forever been inspiring me with his generosity,
v
vi ACKNOWLEDGEMENTS
humanity, and sublime beauty of music in the lonesome and most often
desolate hours of composition.
And last but not the least, my heartfelt thanks go to Palgrave Macmillan
for its vision, professionalism, and dedication in making this book a
reality.
c
ontents
1 C orporate Law 1
1.1 T he Evolution of Corporate Law in China 1
1.2 L egal Framework 2
1.3 C orporations 3
1.3.1 General Introduction 3
1.3.2 Piercing the Corporate Veil 4
1.4 T ypes of Corporations 5
1.4.1 Limited Liability Corporations and Joint Stock
Corporations 5
1.4.2 Special Types of Corporations in China 6
1.4.3 The Single Member Limited Liability Company
(LLCs) 6
1.4.4 Wholly State-Owned Enterprises (WFOE) 7
1.4.5 Public Corporations 8
1.5 E stablishment of a Corporation 8
1.5.1 General Guidelines 8
1.5.2 Incorporators 8
1.5.3 Capital 10
1.5.4 Articles of Incorporation 11
1.5.5 Name and Domicile 12
1.5.6 Establishment Procedures 13
1.5.7 Inaugural Assembly 14
vii
viii CONTENTS
1.6 C orporate Capital and Corporate Finance 15
1.6.1 Corporate Capital 15
1.6.2 Equity Capital 15
1.6.3 Forms of Contribution 16
1.7 R ights of Shareholders 16
1.8 C orporate Finance 17
1.8.1 General Concept 17
1.8.2 Types of Stocks 18
1.9 C orporate Governance 18
1.9.1 The Shareholder Meeting 19
1.9.2 The Board of Directors 21
1.9.3 Managers 22
1.9.4 The Board of Supervisors 23
1.10 P ublic Corporations 24
1.10.1 Special Provisions for Public Corporations 25
1.10.2 Invalid Corporate Resolutions and Relief 28
1.10.3 Fiduciary Duties 28
1.10.4 The Rights and Responsibilities of Fiduciary Duties 29
1.11 D uty of Care 30
1.11.1 Duty of Loyalty 30
1.11.2 Derivative Litigation 31
1.12 C orporate Changes 33
1.12.1 Mergers and Divestitures 33
1.12.2 Corporate Mergers 33
1.12.3 Divestitures 34
1.12.4 Changes in Capitalization 35
1.12.5 Termination of a Corporation 37
1.12.6 Dissolution 37
1.12.7 Liquidation 38
1.13 T he Transformation 40
1.13.1 Registered Capital 40
1.13.2 Shareholder Rights and Corporate Governance 41
2 Foreign Investment Law 43
2.1 T he Evolution of Chinese Foreign Investment Law 45
2.2 T he Governance Regime for Foreign Investment 46
2.2.1 The Governance Framework for Foreign Investment 48
2.2.2 The Chinese Constitution 48
CONTENTS ix
2.2.3 The Laws 48
2.2.4 The Administrative Rules and Regulations 49
2.3 F oreign Invested Enterprises 49
2.3.1 Sino-Foreign Equity Joint Ventures (EJVs) 50
2.3.2 Sino-Foreign Contractual Joint Ventures (CJVs) 51
2.3.3 Wholly Foreign Owned Enterprises (WFOEs) 52
2.3.4 Foreign Invested Joint Stock Corporations
(Foreign JSCs) 52
2.3.5 Foreign Invested Investment Enterprises 53
2.3.6 Branches of Foreign Corporations 54
2.4 E stablishment Procedures and Requirements of Foreign
Investment Enterprises 55
2.4.1 Background and Policy Statements 55
2.4.2 Capital Issues 58
2.4.3 Contributions 60
2.5 S pecial Considerations for Mergers and Acquisitions 63
2.5.1 Overview 63
2.5.2 Special Provisions for Mergers and Acquisitions by
Foreign Equity 67
2.5.3 Special Provisions for Mergers and Acquisitions by
Foreign Equity: Special Purpose Corporations
(SPCs) 69
2.5.4 Antitrust Examinations 70
2.6 T ermination and Liquidation 72
2.6.1 Introduction 72
2.6.2 Ordinary Liquidation Procedures 73
2.6.3 Special Liquidation Procedures 75
2.6.4 Changes and Revisions 75
3 Securities Law 77
3.1 T he Evolution of Securities Law in China 77
3.2 S ecurities 78
3.2.1 Types of Securities 79
3.2.2 Domestic Stocks 80
3.3 B asic Principles of the Securities Law 84
3.3.1 The San Gong Principles 84
3.3.2 Principles of Equality, Voluntary Action,
Compensation, and Integrity 86